Alstom Said to Start GE Talks While Being Open to Siemens

Alstom SA approved plans to start official talks with General Electric Co. about the sale of the French company’s energy business, while leaving the door open to a rival offer from Siemens AG, two people familiar with the matter said.

While Alstom’s board unanimously agreed to discuss GE’s bid, the French company still has an option to examine other offers, the people said, asking not to be named because the talks are private. Siemens said yesterday it will make an offer for Alstom pending access to financial information. Alstom declined to comment on its board meeting.

Alstom, a maker of power equipment and the high-speed TGV trains, is attracting interest after initial discussions with GE progressed in recent weeks, with the U.S. company aiming to buy its energy assets, which generate more than 70 percent of sales. Fairfield, Connecticut-based GE has made a binding offer valuing the whole of Alstom at about $13 billion excluding debt, people familiar have said.

“None of these big players buying Alstom is going to have a smooth ride,” said Simon Toennessen, an analyst at Credit Suisse Group AG. “Siemens is seeing the competitive threat from GE as big enough to consider this step.”

Siemens asked for access to Alstom’s data and permission to interview the management for four weeks in a letter to the French company, the company said in a statement yesterday. Munich-based Siemens, which was also interested in acquiring parts of Alstom more than a decade ago, is willing to match or exceed the financial terms of GE’s offer, people familiar with the proposal have said.

‘Big Demand’

“If in hindsight it transpires Siemens decides Alstom is too expensive, that is a risk to allow the competition look at your numbers,” said Heinz Steffen, an analyst for AlphaValue in Kronberg, Germany, who rates Siemens reduce. “From a political perspective, asking Siemens to preserve all jobs for three years would be a really big demand.”

Alstom, saved from bankruptcy about a decade ago by the state, employs 18,000 people in France and has a market value of about 8.3 billion euros ($11.5 billion). The business is coveted by the government, which wants to extract the best terms from any bidder for jobs and the country’s energy independence. The state doesn’t prefer one bidder over the other, one person said.

Hollande Meetings

In separate meetings with French President Francois Hollande, Siemens Chief Executive Officer Joe Kaeser and Chairman Gerhard Cromme and GE CEO Jeffrey Immelt have sought to appease French policy makers for a deal with Alstom. GE is arguing that its plan, to acquire the energy business while Alstom’s transport unit is separated, would result in fewer job losses because of smaller operational overlaps, said people with knowledge of the matter.

Siemens’s proposal would probably entail swapping some of its rail assets for Alstom’s energy division and creating two “European champions,” French Industry Minister Arnaud Montebourg has said. Siemens would become one of the world’s largest manufacturers of equipment for power plants and electric transmissions while the companies’ train assets would form a France-based rail industry leader, bringing together the German company’s ICE high-speed trains with Alstom’s iconic TGV.

Siemens’s labor representatives, who comprise half of the supervisory board, have sought guarantees for German jobs and production sites in meeting with management, a person familiar with the discussions said.

Rolls-Royce Units

Rolls-Royce Holdings Group Plc said it’s in talks to sell power-generation assets to Siemens, adding to a flurry of possible cross-border deals as some of Europe’s largest engineering companies reshape their portfolios.

Siemens shares yesterday rose 0.6 percent to close at 94.15 euros while GE fell 0.1 percent to the $26.76 in New York. Alstom jumped as much as 18 percent on April 24 after Bloomberg News reported the talks with GE. Its shares have been suspended since Friday.

French regulator Autorite des Marches Financiers said Alstom shares should resume trading today and requested details of the proposals before the market opens at 9 a.m. in Paris. Hollande told Alstom to take its time weighing the offers and to not be bound by an April 30 deadline the company set to make a decision, one of the people said.

Government Intervention

GE has already conducted due diligence and received approval to proceed with the deal from its own board. Alstom will also submit its divestment plan to a vote at a shareholder meeting, another person said.

As in the U.S., the French government can intervene to protect companies deemed to be of national importance from being acquired. In 2005, it passed an anti-takeover decree amid speculation PepsiCo Inc. was planning a bid for dairy-products maker Danone.

Alstom had to be rescued in a 4.4 billion-euro bailout by the state and banks in 2004. The company built France’s power grid and the generators that produce most of the nation’s electricity.

The French state has no direct shareholding in Alstom, although the company depends in part on orders from the SNCF railway network and from Electricite de France SA, the electric utility that’s 84 percent government-owned.

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